Hershey`s Failed ERP implementation: The importance of testing and scheduling

It is reported that over 29% of all ERP implementations fail. In an ERP implementing process your data is imported without hiccups, and inventory and management are taken hand in hand. However, some of the world’s largest (and most recognizable) brands have fallen victim to a botched ERP implementation, often with disastrous results.

Enterprise resource planning (ERP) implementation is a complicated process that requires careful planning and strategy. Integrating front and back-end systems and processes into a shared platform can take anywhere from six months to two years to complete. Multiple factors—such as the size of your organization, how complicated your current setup is, the number of users, and the transfer of data from legacy systems—contribute to the duration and expense of the process.

Perhaps one of the best-known ERP implementation failures was that of Hershey`s chocolate in 1999. Here are some relevant facts:

In 1996, Hershey’s set out to upgrade its patchwork of legacy IT systems into an integrated ERP environment. It chose SAP’s R/3 ERP software, Manugistic’s supply chain management (SCM) software and Seibel’s CRM software. Despite a recommended implementation time of 48 months, Hershey’s demanded a 30-month turnaround so that it could roll out the systems before Y2K.

Based on these scheduling demands, the cutover was planned for July of 1999. This go-live scheduling coincided with Hershey’s busiest periods – the time during which it would receive the bulk of its Halloween and Christmas orders. To meet the aggressive scheduling demands, Hershey’s implementation team had to cut corners on critical systems testing phases. When the systems went live in July of 1999, unforeseen issues prevented orders from flowing through the systems. As a result, Hershey’s was incapable of processing $100 million worth of Kiss and Jolly Rancher orders, even though it had most of the inventory in stock.

When it cut over to its $112-million IT systems, Hershey’s worst-case scenarios became reality. Business process and systems issues caused operational paralysis, leading to a 19 percent drop in quarterly profits and an 8 percent decline in stock price.

A reasonably prudent implementer in Hershey’s position would never have permitted cutover under those circumstances. The risks of failure and exposure to damages were simply too great. Unfortunately, too few companies have learned from Hershey’s mistakes.?

In closing, any company implementing or planning to implement ERP can take away valuable lessons from Hershey’s case. Two of the most important lessons are: test the business processes and systems using a methodology designed to simulate realistic operating scenarios; and pay close attention to ERP scheduling. By following these bits of advice, your company will mitigate failure risks and put itself in a position to?drive ERP success.

Our team has been leading successful ERP implementation projects with Microsoft and Resco Enterprise solutions for small to mid-sized companies in Australia. Connect with one of our consultants to know more.